10 Things You Need to Know About Video Games in 2015

by Kristina Hudson, Executive Director, Washington Interactive Network

I have been writing and speaking about the video game industry for over 10 years, and what was true at the beginning is still true today: 1) Content is King. 2) “It’s all about that talent, Boss”. 3) Mobile is the biggest area of growth. What was the rise of MMO and Console titles in 2005 now gives way to the age of the independent developer building on mobile and PC platforms.

This industry is constantly evolving by pushing technology, business models and customer acquisition techniques and 2015 is lining up to be no different. Here are a few highlights of where the video game industry is today and where the trends are heading:

10 Things to Know about the Video Game Industry

Seattle is a Global Leader in Video Game Development and IP Creation  

Today our industry boasts over 330 companies with over $19 Billion in revenue and is a global leader for interactive media development and IP creation. [read the 2014 Interactive Media Impact Study]

The Seattle region has largest concentration of game developers than anywhere else in the US. Between 2007 and 2014 the number of companies in the Seattle Region had more than doubled from 150 to over 300, a 120% growth from 2006 to 2013. Our talent is the main driver of this growth with over 17,400 employees working in the industry.

We have the Game Changers Right Here in Our Backyard   

We all know we have Microsoft and Nintendo, who are two of the major console makers and publishers. But there are quite a few others that are who have a name within the industry that are making waves. Here are just two of our local game changers:

Bungie Studios is one of the largest independent developers in the world and the creators of the HALO franchise. They recently had the biggest new video game franchise launch in history with their new title Destiny. Bungie partnered with Activision and sold over $500 million of the game into retail stores and first parties worldwide on day one.

Valve Software continues to be a revolutionary and dominant global player in the video game arena. Their STEAM distribution allowed independent developers to access users like no other console before. Their innovative and adaptive game platform continues to distribute and manage thousands of games worldwide.

Virtual Reality 

Speaking of game changers, Virtual Reality (VR) deserves its own dedicated section. We are seeing a number of our local video game developers move into the VR space. For years VR technology has not been sufficient to make this a true business focus. But today, with the emergence of hardware like Oculus, VR and the advancement of the VR science and technology thrusting it ahead, the landscape has changed and VR is now a true, accessible reality for our businesses. This is yet another disruptive technology that may change the way we live, work, and play. Yes folks, this may go well beyond entertainment.

Video Games are a Mass Medium 

Surprised? I think most folks here in Seattle aren’t as surprised as many across the US. Today, 59% of Americans play video games. The average gamer is 31 years old, and 71% are age 18 or older. Nearly half of all gamers are female. And last, but not least, a majority of parents (56%) also say video games are a positive part of their child’s life.

Rise of the Independent Developers

This is where the indie developer becomes an important part of the video game ecosystem. They bring more variety and innovation to the platforms at fractions of the costs.

Over the last few years the number of titles developed for the big three console manufactures have dropped. The cost to make a console game is so expensive that publishers have reduced the number of titles being developed. Less titles in this hit-driven business means an increased risk of missing the mark of what consumers really want to play. This of course leads to less innovation in game play and storytelling which leads to more sequels with there being a community already built around an existing title.

Mobile Games Will Continue to Grow 

We targeted mobile games as a growth sector for years now, and it is still at the top of the list. PricewaterhouseCoopers (PWC) predicts the mobile games revenue in 2018 to grow to be a $15B market. Although it may seem like everyone already has a smartphone these days, smartphone sales are still on the rise in the world-wide market. This gives increased global access to mobile developers. The challenge for independent game developers is discoverability. With so much content out there, how can they rise above the noise?

Challenges of User Acquisition and Retention  

Some think there will be a trend where we will see global brand names partnering with smaller and more regional developers. This helps to extend the reach of these global brands into the selected regions. Even better for the independent developer, they get a serious marketing partner.

With so many games available these days, the costs of acquiring users has gone through the roof. The game industry faces the challenge of how to build the community around their games and how to keep that community engaged so they continue to play (and pay for) the game. As mentioned above, this is a particular challenge for indie developers. They don’t have the same marketing funds for their product to compete with major publishers and distributors. The user acquisition challenge is evident in the Super Bowl Ads this year. There were three video game ads that ran during the Super Bowl: Clash of Clans, Game of War, and Heroes Charge. All of these are very successful mobile games, and the developers felt it was necessary to spend the massive advertising dollars to acquire more players.

Is the console dead? Maybe not.

The key to success for consoles will always be about the consumer’s ease of access to content –exclusive content to that console, as well as a variety of games and entertainment available to the user. Whether it be a through a physical or digital console, consumers want to be able to access their content anywhere, anytime, with any device.

PWC also sees improved online console games stores and increased access to broadband as a factor for driving digital distribution of console games. The PWC study states “By 2018, digital will account for 37% of global console games revenue, up from 23% in 2013.”

The debate over the lifespan of the console continues…. PWC’s most recent report predicts that global console games revenue will reach $31.9B in 2018. Microsoft’s Xbox One’s “emphasis on being a key piece of technology for the living room means that this interest will last longer than previous generations, with devices being used more often and appealing to a broader demographic.” From the beginning, Xbox was always meant to be more than just a game-playing machine, but rather a place to access and play all of your entertainment and content.

Monetization Models Still a Challenge 

We have talked about the saturation of games on the platforms. To attract users, many developers use the free to play model. This model gives users access to a fully functional game, but must pay microtransactions to access additional content. For this model to be effective, the game needs to have an innovative design. Even more critical is it must be able to retain users. As noted above, this can be difficult, especially in social, casual, and mobile games.

Advertising in Games 

Advertising may be one of the biggest influencers on business models over the next few years. In particular, video advertising is a fast growing segment as it has proven to be more effective than banner ads and other advertising options. However, rather than forcing players to watch ads, you may see players able to pick the ads they want to see. Giving more control to the player may make this a more acceptable monetization strategy in the game world.

– Kristina Hudson is Executive Director of Washington interactive Network (WIN). WIN is a 501c3 organization with the mission to promote, nurture and grow the interactive media in our State. Their annual Power of Play conference is May 15th and 16th where you will hear the latest trends and innovations from executives and the region’s hottest companies. For more information, go to: www.PowerOfPlay.us.

You can reach Kristina by email at kristina@washingtoninteractivenetwork.org.

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